The government has agreed to provide additional incentives to the State-owned Binh Son Refining and Petrochemical Company Limited (BSR) regarding tax reductions and giving it financial autonomy, under which it foregoes compensation from PetroVietnam for any losses, from the beginning of next year.

The payment for BSR products sold domestically (including its own internal consumption) to the State budget has been cut from 13 to 10 per cent from September 3 to end of the year.

The new regulations mean that petrol produced by Dung Quat will have a sales price matching the price of imported products from South Korea and be 10 per cent lower than prices of products from other ASEAN countries.

“The new regime will increase the competitiveness of the BSR’s products given its recent difficulties,” Mr. Nguyen Hoai Giang, Chairman of the BSR, told VET.

BSR, the operator of the Dung Quat Oil Refinery and Petrochemical Plant in central Quang Ngai province, has been seeking assistance from authorities since early last year after facing difficulties in selling its products on the domestic market due to changes in State policies. Specific preferential tax rates applied on imported oil and petroleum products from ASEAN were significantly lower than the tax rates on local enterprises.

When the company has financial autonomy, “it can be sure that local customers will buy BSR’s products due to advantages in domestic supply regarding transport costs, USD exchange rates, and tax payment timelines compared to imported products,” Mr. Tran Ngoc Nguyen, CEO of BSR, was quoted as saying.

“If the company can sell more products, Dung Quat will be operate at optimal performance and State budget contributions are expected to increase by $100 million,” he said.

The PetroVietnam Insurance Corporation (PVI) and BSR signed a cooperation agreement with Singapore’s Marsh Risk Consulting Company (MRC) a few months ago on providing consulting services and risk management in the insurance period of 2016-2020. Mr. Nguyen revealed that the company has been in the process of completing the reform of its administration system under MRC’s consultancy.

“We are continuing with our equitization plan along with the plant’s upgrade and expansion plans,” Mr. Giang said. Under the government’s plan, its IPO will begin by the end of next year and “the company is proceeding to invite consultants to conduct a valuation for submission to the government,” he added.

Russia’s Gazprom Neft recently announced the withdrawal of planned investment in Dung Quat because the two parties could not come to a final agreement. “The company has not yet found a strategic investor to take part in the IPO and expansion process,” Mr. Giang told VET.

BSR has completed about two-thirds of the Front End Engineering Design (FEED) Procurement Contract (PC) for upgrade and expansion projects and may finish it completely in April 2017.

The refinery’s capacity will be increased about 30 per cent, from 6.5 million tons to around 8.5 million tons per year. The upgrade and expansions will add new workshops with modern technologies, increase the capacity of existing workshops, and transform auxiliary workshops, with total investment of about $1.8 billion, and are expected to be completed by the end of 2021.